What the Health Care Reform Plans Get Wrong

No one wants to derail health care reform. But there are different concepts, definitions, and support for different kinds of health reform. What might derail this version could be a combination of larger economic pressures and negotiators not wanting to raise revenues (or public debt) so much. It won’t be the organized interests around the table that will derail this. Most were in favor of a deal when it looked like it was inevitable, and they thought they could carve out a deal on their terms.

You’ve called a public plan a “gateway drug” on the way to a government-run, single-payer system. But wouldn’t the competition be healthy both for the health care industry and for consumers?

If we had true competition, that would be fine, but I don’t think that’s what the plan design is about. The people who are launching a public plan don’t want a level playing field. When you read how the exchanges are set up in pending legislation, the clear intent is to expand the market share of politically controlled, highly regulated insurance “choices” that eliminate current private-sector options over time.

Republicans have been criticizing the Democrats’ health reform proposals. But why haven’t they come up with one of their own?

A number of Republicans have offered proposals, but there’s not any consensus on a single one. Republicans have been largely irrelevant in the initial stages of this debate. The deals were cut by the Democrats in control, with the interest groups all ready to sign on to whatever peace agreement they saw as inevitable and necessary. Physician groups got all enthusiastic about higher payments for their bills, while the business community thought they might shed some of their responsibility to pay for costly coverage. And there wasn’t any kind of inside-Washington, hard-core, vigorous opposition to this. But when you get a big majority, people don’t imagine they have to pay attention to the other side.

Many economists believe that the only way to get everyone covered is by requiring people to have health insurance, just as people have to have car insurance if they want to drive. Why should health insurance be any different?

The question is: Is the goal of universal coverage one that should be pursued? And if universal coverage is such an urgent goal, then why don’t Democrats even begin to phase it in until 2013? It’s more a platitude than a reality. I don’t think we’ll ever get to universal coverage per se, but we could do a number of things to increase levels of affordable, less comprehensive coverage for millions of Americans.

Like what?

We could lower the future costs of coverage by rewarding more efficient and effective delivery of care, as well as the healthier behaviors and decisions that maintain and improve one’s personal health. We could rely on more effective regulation that does not try to micromanage market-based choices but instead allows any willing insurer to strike mutual bargains with any willing consumer–as long as the contractual terms are transparent, understandable, and enforced consistently. We could also protect individuals against exclusions for pre-existing conditions and re-underwriting based on changes in one’s previous risk status–but only for those who maintain continuous insurance coverage.

You’ve described proposed health insurance subsidies as “candy” that encourages more care instead of better care. How can people of limited means afford health coverage without help?

There’s a difference between setting a lower standard of coverage and targeting subsidies so that they are more sensitive to risk and income, versus trying to set a make-believe upper-middle-class standard of coverage and care and pretending that we can pay for it. Once you get into wish land, there’s a tendency to load up the benefits, particularly in the House bill. That doesn’t mean we shouldn’t assist people, but we can’t do that for everybody. If you’re subsidizing people at 400 percent of poverty–and most people’s incomes are below that–we can’t afford that.

Conservatives have long favored taxing employee health benefits, and now even some Democrats are considering it. Yet you’ve argued against this. Why?

If benefits are not taxed, health care appears to cost less than it actually does. What is being proposed, though, is not to simply provide better incentives for individuals to spend less on health care. It’s to take a slice of what some people with private health insurance are receiving now in tax benefits and put it into another form of third-party payment of health costs by expanding public health insurance. But you haven’t turned around the basic incentive structure; you’ve just moved the dollars around the field.

You’re skeptical about the president’s promise that employees can keep their health insurance if they’re happy with it. Why?

It doesn’t fit with the underlying code of the master plan, which is intended to guarantee that all the benefits and coverage details in the various plans are similar. The campaign version was that the national health exchange was only for those who are uninsured or whose employers don’t offer coverage. But in the actual House legislation, in 2015, even large employers will be subject to “competition” from the more regulated, semiprivate plans in the exchanges. And in the House legislation, there’s an explicit timeline whereby if you have individual insurance that doesn’t conform to the new rules, you’ll have to change plans, because the old coverage will no longer be “qualified.” The advocates of this bill really do want a political takeover of the marketplace. These design details are in direct conflict with the language that if you like what you have, you can keep it.

What do you think the chances are that we’ll see comprehensive health reform in the United States this year?

Less than 25 percent, and probably declining. The advocates of this year’s initial version of comprehensive health reform misread the public mood and sentiment, and couldn’t jam it through the political process fast enough. We have unresolved conflicts and contradictions in our mix of political sentiments. This version was too much, too fast, and not put together in a way that was sustainable. But all of us, hopefully somewhat more chastened and humbler, will be back to consider health reform in a different context. Just not this year. 2011 is more likely.